Governor Bob Taft is opposed to giving the state
treasurer the power to hire and fire the five public
pension system directors, according to the Dayton Daily
News – a proposal contained in a pension reform bill
recently passed by the Ohio legislature.
“My view is that the entire board should be responsible for
hiring the directors,” Taft said last week, according to
the report.

The Buckeye State’s five retirement systems have
challenged the provision, claiming that this “super
authority” would disrupt the checks and balances that exist
in the current board structure by concentrating too much
power with one person, and further caution that empowering
the state’s treasurer with these appointment
responsibilities impedes board members’ fiduciary duty, and
potentially interferes with the current statutory structure
that separates investment decision-making from political
considerations (see
Ohio Retirement Systems Unite Against Common “Foe”
).

“Buy” Sides

Taft also questioned the so-called “Buy Ohio” provision
contained in House Bill 227, a provision that would require
that 70% of investment trades and 50% of externally managed
assets go to managers with a significant presence in the
Buckeye State – a provision that the state’s retirement
systems say could cost an estimated $180 million.
The Ohio Retirement Study Council, which evaluates
pension-related bills, opposes both Buy Ohio and vesting
the hiring and firing power with the state treasurer.
Directors of Ohio’s five public pension systems have also
come out against the two provisions (see
Ohio Retirement Systems Unite against Common “Foe”
).

Governor Taft said that while it is important to have a
goal to use Ohio securities dealers whenever they can
provide adequate service, “…that doesn’t necessarily mean
that you have to have a fixed quota in the bill.”
The Ohio Bureau of Workers’ Compensation has a goal of
making 70% of its securities trades through Ohio brokers,
but it is not required to do so.

Last month the Ohio House and Senate passed
competing pension reform bills, setting the stage for a
legislative battle as the two bodies try and hammer out a
compromise before the legislature adjourns in December
(see
Bill Places Ohio AG in Pension Investigator Role
). While the two bills share similarities, the
investment-restrictive provisions of H.B. 227 have also
drawn criticism from the Council of Institutional
Investors and the National Association of State
Retirement Administrators (NASRA) (see
Ohio Pension Funds Face “Home Grown” Investment
Restrictions
).